Preparing for CECL

The financial services industry has been closely following the Financial Accounting Standards Board’s (FASB) proposed guidance for credit impairment. The current exposure draft was issued in December 2012, and the FASB is still in the process of evaluating feedback and making refinements to the proposal. Recent news indicates that the final standard may be issued toward the latter part of 2015, with adoption likely to be in 2018. This guidance proposes the use of a Current Expected Credit Loss (CECL) model, which is a forward-looking credit loss model that projects losses over the remaining life of a loan, as opposed to the current model that estimates losses that have already been incurred as of a point-in-time.